In Conversation With: Gulf Pinnacle Logistics
CEO of Gulf Pinnacle Logistics, Rodney Viegas, talks mergers and acquisitions
Why was Gulf Pinnacle Logistics (GPL) established?
GPL has the vision to become a MENASEA-focused fully integrated logistics and transportation holding company.
We aim to become a logistics and transportation integrator of the highly fragmented mid sector market, encompassing four unique business models: freight-forwarding, warehousing, road transportation, courier and e-commerce services. Our mission is to aid in making international trade more seamless for the mass market that cannot afford the large scale players.
Today, with the world trade growing faster than the world GDP, this region is set to boom owing to its strategic location, top-ranked transportation infrastructure (spanning sea ports, airports and road), low fuel costs and existence of longstanding successful logistics firms.
What are your criteria and conditions for acquiring new companies?
Our philosophy is to invest in companies that typically have strong management teams, a scalable business model and the potential to become a regional leader in their respective fields. The companies should be profitable, should have existed for at least two to three years and may become strong candidates for future industry consolidation.
The envisioned value creation levers are proprietary deal sourcing, business expansion, regional synergies and industry consolidation, and a typical holding period will be four to five years.
How significant is the logistics sector for investors?
Our strategy is geared towards the sectors where growth opportunities exists and good returns and value proposition are there. Same goes for logistics. Our strategy is to become an integrated logistics player in the medium-scale segment in the MENASEA region. This strategy was formulated based on a keen analysis of an interesting phenomenon we observed in this sector. We saw a huge disparity in the models of the large-scale and medium-scale companies in this industry. While integration is the premise of a large-scale player, fragmentation and non-substantive sizes have majorly governed the medium-scale segment. Perhaps such a disparity emerged because trade was the mainstay of MENASEA economy for generations, and thus attracted many players over the years. With our strategy, we see the time ripe to integrate in the high growth medium segment.
Upon acquisition, does GPL play a role in the management and operations of the concerned companies?
Beyond buy approach is the start of value creation process for our portfolio companies and the way we build this further is through implementing a number of key strategic and operational initiatives ranging from:
Business planning and development
Carrying out business intelligence
Reviewing and analyseng the data, trends which helps us form the right strategy
HR function, to ensure we retain and recruit best talent to support the next level of growth
Procurement, which we consider is essential to manage costs
Integrate the finance function across the platform
Technology: to ensure we have most efficient systems, upgrade them if required
The above factors drive operational efficiency to the business.
In addition, we look at operational streamlining, standardisation of processes, integration of middle and back office across the entire platform.
To implement these strategies and operational initiatives, we set up full operational team with significant experience in the respective sectors who work together to achieve common objectives.
Our focus so far has been is to acquire SME/mid market businesses with inefficiencies but with tremendous growth potential requiring capital and expertise to unlock the value. As a takeaway, from buy and build strategy is to buy SME/mid market businesses at low single digit multiple and aim to create value to these businesses by building efficiencies, through scaling, integrating and consolidating the operations with rest of the businesses which drives the recurring net income growth across the platform.
What is your vision for GPL for the short and long-term futures?
World trade has never before been as sizable, highly-valued and complex as right now. The predisposition rests no more towards trade between developed countries or between the developed world and the outsourcing giant China. Past few years have seen the developing world emerge as a significant consumer market, marking the new phenomenon of South-South trade. Medieval period trade routes such as the Silk Road have gained prominence in the modern world for the first time within the developing world. Governments around the world and more so in the trading hubs, are making exceptional investments in upping the transport infrastructure across seaports, airports, road corridors and railways.
Amidst all of this, we see a vital logistics opportunity in the trading hubs of Middle-East, North Africa and South East Asia (MENASEA). Logistics industry has not yet grown at the pace of world trade in terms of its development, and this is where the opportunity lies to become a part of the sure growth in this industry.
What is the GPL message for 2016?
As part of the vision, we anticipate the evolution of the MENA markets from frontier status to emerging status and eventually to developed status. The successful evolution of this cycle means a significant repricing in assets and a significant jump in valuations. Smart fund managers who have expertly placed themselves within this cycle in the most opportunistic assets will benefit the most. We aim to tap on these opportunities and offer compelling reasons to build a dynamic multi-asset portfolio generating handsome returns for our investors.